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17 Retailers on the 2018 Death Watch

A big year for closings

The past year has been a bleak one for many retailers. Over 20 retail
chains -- including Radio Shack, Toys R Us, and HHGregg -- filed for
bankruptcy, and some were liquidated.

Things are not likely to get better in 2018. They may even be worse.

"I think the early part of next year will be pretty bad ... I think it
will be tough," Moody's lead retail analyst Charlie O'Shea told
CNBC
.

The 17 companies below all struggled in 2017. Many of them closed
stores, and some have even filed for bankruptcy at least once before.
These aren't the only retailers struggling as we head into 2018, but
they are some of the most prominent.

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Source: Sears

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Sears Holdings

Leaving
Sears
Holdings
(NASDAQ: SHLD)
off a list of companies not likely to survive 2018 would be like
omitting Tom Brady from a discussion of all-time great quarterbacks.
Sears has been moving in reverse for years, losing money and closing
stores at a remarkable rate.

Sears has survived only by selling off assets and borrowing money from
funds connected to its CEO, Edward Lampert. That carousel may stop
soon, as the company is running out of
things to sell
. It currently has $8.1 billion in assets and $12 billion in
liabilities as of the close of Q2 2017. With profits remaining a distant
dream, it's hard to see Sears making it another year.

Toy R Us

Toys R Us filed for bankruptcy back in September. It also secured $3.1
billion in bankruptcy financing from a group of lenders, though, which
suggests that the company will emerge from bankruptcy -- but it's not a
guarantee.

The problem is that the climate in which Toys R Us operates
has not improved. Some of its brick-and-mortar rivals are selling toys at deep discounts, drawing customers to their stores in hopes that they'll buy higher-margin products as well. Meanwhile, online retailers can often sell toys for lower prices while still turning a profit.

Going forward, the toy retailer has a plan to turn its stores into
interactive destinations. That's what it should have been doing for
years, but the plan may or may not work in such a competitive
environment.

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Source: J.C. Penney

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J.C. Penney

J.C. Penney
(NYSE: JCP)
isn't in the same dire straits as Sears. That, however, is sort of
like saying that someone with one brain tumor is in better health than
someone with two.

CEO
Marvin Ellison has made some bold moves, and comparable-store sales
have been increasing, but the chain continues to lose money. In fact,
despite the rise in sales, the chain's loss grew to $128 million in its
most recent quarter from $67 million in Q3 2016.

Claire's stores

In 2017 Claire's appeared on a lot of lists of companies not likely to
survive the year. Its condition has improved slightly: In the most
recent quarter, overall sales rose 0.8%, while same-store sales grew by
1.1%.The problem is that the chain is in a precarious financial position.
As of Oct. 28, it had cash and cash equivalents of only $25.8 million,
down $5.4 million from the previous quarter. It also had $71 million
drawn on its credit facility, putting the chain underwater and
vulnerable to a downturn in sales.

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Source: J. Crew

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J. Crew

A number of companies on this list are struggling because foot traffic
has dropped at many shopping malls. J. Crew, whose stores are generally
located in malls, is feeling the effects of this trend. In Q3 the
chain's overall sales fell 5%, while comparable-store sales dropped by a
gut-wrenching 9%. In addition, the chain's net loss increased to $17.6
million, up from $7.9 million during the same quarter a year ago. The
retailer suffered a net loss of $161.6 million through the first nine
months of fiscal 2017, up from $24.6 million during the same period in
2016

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Source: Charlotte Russe

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Charlotte Russe

Another mall-based retailer, Charlotte Russe has struggled partly
because of lower foot traffic and partly because some clothing sales
have moved online. The chain, which appeared on a
list
of at-risk retailers by Fitch earlier this year, caters to a younger
clientele. That audience has been the most willing group to take its
business to digital sellers.

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Source: Bon-Ton

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Bon-Ton Stores

Department stores have been hit especially hard in the current retail economy.
The Bon-Ton Stores
(NASDAQ: BONT)
has not been left unscathed. The chain saw its comparable-store sales
drop by 6.6% in Q3, and its loss climbed from $31.6 million in Q3 2016
to $44.9 million in Q3 this year.

Bon-Ton has also been closing stores and plans to shutter at least 40
of its locations in 2018. The company has retained AlixPartners LLP and
PJT Partners Inc. to provide operational and financial advisory
services.

Bi-Lo

Bi-Lo, the parent company of the Winn-Dixie grocery store chain, has
filed for bankruptcy once before, in 2009. The company survived that
ordeal, but it appears to be on the brink of filing again. The chain,
which employs about 50,000 people, has roughly $1 billion in debt and is
in danger of default, according to
Bloomberg
.

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Source: Getty Imagea

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Barnes & Noble

Barnes & Noble
(NYSE: BKS)
has shown some progress in transforming its business by expanding its
merchandise and adding more food service, but it remains vulnerable. The
chain, which has been losing money and market share for years, saw
overall sales drop by 7.9% in Q2 2018. In addition, the retailer saw its
loss rise to $30.1 million from $20.4 million in the prior year.

There's no guarantee that Barnes and Noble will be able to staunch its
cash-flow hemorrhage. It's also uncertain whether the company's new
initiatives, such as putting restaurants and even serving alcohol in
some locations, will work.

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Source: Getty Images

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Charming Charlie

Another mall retailer, Charming Charlie recently filed for bankruptcy.
It plans to emerge and continue to operate after closing around 100
stores. The company released a statement about its bankruptcy:

At Charming Charlie we are undertaking a comprehensive financial and
operational restructuring to ensure that we can move forward with our
previously announced Back-to-Basics strategy and continue to serve our
loyal customers. For all of our customers, vendors and talented
employees --CharmingCharlie.Com and hundreds of Charming Charlie stores
across the country are open for business and serving customers.

Despite the company's plan to emerge from its voluntary Chapter 11
filing, there are no guarantees. The company remains exposed to market
conditions and its mall-based real estate.

Nine West

Another retailer that declared bankruptcy in 2017, Nine West has closed many of its stores -- and a July report in
The New York Post
suggested that the rest could soon follow. Because the company is
privately held, information on its finances is limited, but the company
has been closing down stores when their leases expire. That suggests the
company at least wants a much smaller retail footprint as it tries to
establish a digital-only (or digital-mostly) mode.

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Source: Getty Images

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Payless

It's apparently not a great time to be selling shoes. Payless
completed its bankruptcy proceedings in April, which helped it shed some
stores and cut some debt. However, the company still faces the same
challenging market conditions that forced it into bankruptcy in the
first place.

The chain closed 800 stores during its bankruptcy proceedings, but it
still has about 3,500 left around the world. That's a tremendous amount
of retail exposure in a market that's rapidly moving away from
brick-and-mortar stores.

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Source: Getty Images

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GNC

GNC
(NYSE: GNC)
is not as desperate as many of the other companies on this list. Last
quarter even saw the company turn a profit of $21.5 million. That's down
from $32.4 million in the same quarter last year, and it's not much of a
profit on $609.5 million in sales, but it's better than a loss.

The challenge for GNC is that it has a lot of mall exposure, and its
product line is vulnerable to digital rivals. Going forward, it will
have a hard time giving consumers a reason to visit stores. In addition,
the company recently pulled an attempt to raise money by putting some
senior secured notes on offer, "
as the terms and conditions offered were not sufficiently attractive
to the company for GNC to move forward," according to a press release.That suggests that the funding markets see risk in the company as
well. It's not a mortal blow, but it's another telling sign.

Vitamin World

After filing for bankruptcy in September, Vitamin World planned to
close 124 of its 345 stores and sell the rest off to another company,
Newsday
reported
. The chain had "originally intended to proceed with a plan of
reorganization," but "unforeseen operational challenges and liquidity
concerns have caused the debtors to now pursue a sale of substantially
all of their assets," the retailer's attorneys wrote in a court
document.

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Source: Getty Images

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Sears Hometown and Outlet Stores

Like the namesake company it was spun off from,
Sears Hometown and Outlet Stores
(NASDAQ: SHOS)
has struggled. The good news here is that unlike Sears proper, Sears
Hometown and Outlet Stores has shown some recent signs that a turnaround
could be possible.

In Q3 the company trimmed its loss from $93.2 million in the year-ago
period to $10.9 million. It's still troubling, however, that same-store
sales fell by 9.1% during the quarter. CEO Will Powell did explain that
in the earnings release:

"Last year during the third quarter we made promotional and pricing
decisions that proved to be unprofitable," he said. "We did not repeat
those actions during this year's third quarter, but as a result,
comparable store sales suffered."

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Source: DXL

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Destination XL Group

Another chain that's on this list partly because the overall climate is so challenging,
Destination XL Group
(NASDAQ: DXLG)
showed improved results in its most recent quarter. Total sales rose
by 1.8%, while comparable-store sales were nearly flat, dropping 0.1%.

In the earnings release, CEO David Levin said:

"Our third quarter results reflect the difficult retail apparel
environment that has persisted for most of 2017. ... Improvements in
conversion and average transaction value allowed us to deliver
essentially a flat comp for the quarter. On a positive note, store
traffic has picked up considerably in the last two weeks of October and
the first two weeks in November."

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Source: Getty Images

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Perfumania Holdings Inc.

Perfumania
filed for bankruptcy in late August, with plans to emerge from the
filing as a privately held company. The chain planned to close stores
and focus more on its digital operations. It received $84 million in
debtor-in-possession financing from its existing lender,
Wells Fargo, which is expected to be replaced by a $100 million exit facility upon emergence, according to a press release.

"The company has been working diligently to amend its business model,
reduce its cost structure, improve supply chain efficiency, optimize
marketing, reduce expenses and improve operating results long-term,"
said CEO Michael Katz. "Today's actions allow the company to expedite
all of these initiatives to create a stronger company with the financial
resources to invest in areas that will foster our long-term growth."

Again, the challenge for the retailer is the market and the fact that
moving away from brick-and-mortar retail and into e-commerce is not as
easy as it seems. It's also telling that after filing in August, the
company still has not completed the process and emerged from bankruptcy
protection.